Report Cites Slower Economic Growth

Hampton Roads' growth will fall below the nation's for the first time in years, says an Old Dominion University study.

The economic boom times are over for Hampton Roads, says Old Dominion University's State of the Region report for 2006.

Incomes in the region in 2002 and 2003 rose more than has been reported, but slower increases in defense spending this year and cooling of the housing market mean the region's rate of growth will fall slightly below the nation's for the first time in years.

FOR THE RECORD - Published correction ran Thursday, October 5, 2006.A headline on Tuesday's front page should have stated that Old Dominion University's State of the Region report cited slower economic growth for Hampton Roads, not an economic decline. (Text corrected.)

"We're not heading into a disastrous time; it's not going to be as good," said James Koch, ODU Board of Visitors professor of economics and president emeritus of the university.

The seventh annual report also examined the region's housing markets and predicted tough times ahead for condominium sales. It looked at the value of commuters' time lost to worsening traffic congestion and the economic costs of having a high number of households headed by single parents.

The report predicts that the region's gross regional product, the value of the goods and services produced here, will grow 3.2 percent to $62.51 billion this year -- larger than the economies of 15 states -- from $60.59 billion last year, when the economy grew 3.7 percent from 2004.

The slowdown partly reflects an end to the Department of Defense's efforts over the past several years to increase military housing allowances and bonuses.

"In the first couple of years of this decade, military spending went up more than 10 percent," Koch said. "That was a tremendous economic thrust. We're now going up 2 to 3 percent."

With incomes not rising as rapidly as in previous years, stores will find that things don't leap off the shelves as quickly, and automobile dealers might find their wares sticking around on the lots longer, he said.

Military decisions also affect the number of jobs in the region, and Hampton Roads stands to lose potentially 25,000 jobs during a five-year period if Naval Air Station Oceana loses jets. That's 2.5 percent of the region's job base.

Another looming loss is the Ford assembly plant closing in Chesapeake. Over five years beginning several years from now, the closing could cost 1 percent of the area's job base and eight-tenths of a percent of the gross regional product.

The slowdown in the region's economy --and particularly in the Defense Department's efforts to help military members buy homes off base -- will drive push deceleration in the region's housing market. That market currently sees homes overvalued by about 20 percent -- twice as overvalued as last year at this time.

That doesn't mean prices are due to fall, Koch said. It means sellers won't make as much of a profit as they might have expected, and homes will stay on the market longer. A house listed at $400,000 might fetch $350,000, or sellers might find themselves offering incentives such as closing costs.

The high prices relative to incomes, unemployment, building costs and mortgage interest rates also mean that renting has become even more attractive.

"Everyone who wanted to buy a house has bought one," said Aubrey Layne, president of Great Atlantic Management, which manages 10,000 apartments and condominiums in Hampton Roads

Where housing experts such as Layne and ODU's Koch see trouble ahead is for those hoping to sell condominiums.

Building permits for single-family homes have remained stable, peaking in 2003 at 7,850. That means there's probably not an oversupply.

But condominium permits rose to 3,513 in 2005 from 930 in 2000.

Koch predicted that people who bought condos hoping to sell them would instead become landlords at least for a few years.

"I can tell from personal experience, knowing people who have purchased three or four units in downtown Norfolk -- and they don't intend to live in any of them -- they're headed for disappointment," he said.

The report also noted:

* Traffic congestion in Hampton Roads this year will cost $472.9 million this year in lost time and increased gasoline costs, compared with $347 million in 2003 as the number of cars and trucks in the region has increased faster than the population and wages have increased.

* Racial disparities are "astonishingly large" when it comes to family arrangements.

The ODU researchers found that more than 81 percent of white families are headed by married couples but that 46 percent of African-American families are.

And economic disparities between families headed by single mothers and those headed by married couples are huge -- at least $32,000 when looking at the region by locality. *

$424.8 million

Value of time lost to Hampton Roads traffic congestion this year.

20%

Amount husing market is overvalued in Hampton Roads.

68%

Percentage of families in Hampton Roads headed by a married couple.

FAMILY INCOME

The median family income by family type in Hampton Roads in 2000:

Single Father Single Mother Married Couple

Hampton $32,527 $19,345 $52,498

Isle of Wight $33,000 $19,705 $60,930

Newport News $25,576 $16,378 $50,126

Suffolk $33,060 $16,514 $55,714

Williamsburg $21,875 $11,794 $74,250

Source: U.S. Census, Old Dominion University State of the Region Report 2006

WAGE INCREASES

Percentage increases in wages per worker, 2001 to 2004:

34.6%

Hampton Roads military personnel.

13.5%

Hampton Roads private-sector employees.

9.3

U.S. private sector employees.

Sources: U.S. Department of Commerce, Old Dominion University Economic Forecasting Project

READ IT ONLINE

To see a copy of Old Dominion University's 2006 State of the Region report, go to www.odu.edu/bpa/forecasting/index.shtml and click on "State of the Region reports."